Global recovery continues on a good drive
Taiwan's recovery taking a short break

The Taiwanese Economy in October 2017

The US and European economy both did very well in the third quarter
of this year. The Chinese economy slowed down a little bit compared
with the growths of previous two quarters; however, its economic
performance is still better than the market expectation. As a result,
the Global Insight Institute adjusted its forecast for this year's
global GDP growth upward. The improved global economic conditions
did help pick up Taiwan's growth especially in exports; nevertheless,
the momentum has come to an end, whereas Taiwan's recovery is taking
a short break. The export growth in October was not as strong as
earlier months due to base effect.
Taiwan's exports in October 2017 increased by only 3.0% compared
with the same month of 2016 that would be the 13th month of positive
growth in exports. Regarding imports, Taiwan's imports in October
2017 increased by 0.13% compared with imports in October 2016. Exports
and imports grew by 12.95% and 12.99% y-o-y respectively from January
1st till the end of October this year, Taiwan's exports and imports
gave a trade surplus of US$ 45.78 billion or an increase by 12.81%
on a y-o-y basis during this period.
Taiwan's consumer price index (CPI) went down by 0.32% in October
2017 compared with the same month of previous year. The core inflation
rate stood at 1.13% in October, 2017. In addition, the wholesale
price index (WPI) moved up by 1.58% in October 2017 on the year-on-year
basis. On the cumulative basis, the CPI and WPI went up by 0.59%
and 0.89% respectively compared with the same period of last year.
As for exchange rate, the NTD went somewhat stronger due to the
relatively weaker USD, as the Fed had sent out certain dovish messages.
Anyway, the NTD/USD stood at 30.17 in late October 2017 indicating
a 0.45% appreciation. Regarding the interest rate, it remained low
and steady in October 2017 due to the continued loose monetary operations
by the CBC with respect to the most recent CPI reading; the lowest
and highest over-night call rate in October 2017 stood at 0.175%
and 0.189% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were
better than expected in the target month was 26.5% or decreased
by 3.9 percentage points compared with respondents who perceiving
better business in the previous month. The portion of those perceived
business were getting worse in the target month was 26.6% or increased
by 5.4 percentage points than 21.2% perceiving worse business of
the previous month. The portion of manufacturing firms who perceived
business remained constant in the target month was 47.0% or decreased
by 1.4 percentage points compared with 48.4% perceiving constant
business in the previous month. Overall, manufacturing firms perceived
the business in the target month was neutral to somewhat pessimistic.
In addition, the portion of manufacturers who perceived business
would be better in the next six months was 21.5% in the target month
or increased by 3.0 percentage points than 18.5% feeling more optimistic
about the future in the previous month. The portion of firms who
perceived the economic outlook would be worsening was 16.7% or increased
by 1.3 percentage points compared with 15.4% feeling rather pessimistic
about the future in the previous month. The portion of manufacturing
firms who perceived business remained constant in the next six months
stood at 61.8% or decreased by 4.3 percentage points compared with
66.1% feeling neutral about the business outlook one month earlier.
Overall, manufacturing firms perceived the business in the near
future was quite neutral.
The manufacturing composite indicator for October, 2017 adjusted
for seasonal factors on moving average, saw a downward correction,
and from a revision of as 101.66 points in September moved down
to 100.69 points in October that would be the second month consecutive
drop. Figure 1 shows a decrease of 0.97 points.
The TIER service sector composite indicator for October 2017 adjusted
for seasonal factors on moving average, also saw a downward correlation,
and from a revision of as 93.28 points in September moved down to
91.05 points in October that would also be the second month consecutive
drop. Figure 1 shows a decrease of 2.23 points.
In addition, the TIER Construction Sector Composite Indicator for
October 2017 adjusted for seasonal factors on moving average saw
a downward correction, and from a revision of 95.81 points in September
went down to 93.40 points in October. Figure 1 shows a decrease
of 2.41 points, the first dip after a one-month hike.

Forecast on Individual Industries

Following are manufacturers' sentiments that are industry-specific
in the monthly TIER surveys:

● Manufacturers' sentiments that have been in decline in the October
survey and are expected to deteriorate over the next six months
include:
Plastic Products Manufacturing, Motorcycles Manufacturing, Basic
civil structure construction.

● Manufacturers' sentiments that have been in decline in the October
survey, but are expected to improve over the next six months include:
Plastics and rubber raw materials.

● Manufacturers surveyed who felt the October outlook was the same
as the previous month, but the outlook is expected to exacerbate
over the next six months include:
Data Storage Media Units Manufacturing and Reproducing.

● Manufacturers surveyed who felt the October outlook was the same
as the previous month, but the outlook is expected to improve over
the next six months include:
Non-metallic Mineral Products Manufacturing, Cement and Cement
Products Manufacturing, Iron and Steel Basic Industries.

● Manufacturers' sentiments that have improved in the October survey
and is expected to deteriorate over the next six months include:
Audio and Video Electronic Products Manufacturing, Restaurants
and hotels.

● Manufacturers' sentiments that have improved in the October survey
and is expected to remain upbeat over the next six months include:
Paper Manufacturing, Machinery and Equipment Manufacturing and
Repairing, Cutlery and tools Manufacturing, Industrial Machinery,
Precision Instruments Manufacturing.

● Manufacturers' sentiments that have improved in the October survey
and the trend is expected to continue for the next six months include:
Motor Vehicles Manufacturing, Retail sales.